[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 2679 Introduced in Senate (IS)]







107th CONGRESS
  2d Session
                                S. 2679

To amend the Internal Revenue Code of 1986 to provide for a tax credit 
 for offering employer-based health insurance coverage, to provide for 
 the establishment of health plan purchasing alliances, and for other 
                               purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             June 25, 2002

    Mr. Baucus (for himself and Mr. Smith of Oregon) introduced the 
 following bill; which was read twice and referred to the Committee on 
                                Finance

_______________________________________________________________________

                                 A BILL


 
To amend the Internal Revenue Code of 1986 to provide for a tax credit 
 for offering employer-based health insurance coverage, to provide for 
 the establishment of health plan purchasing alliances, and for other 
                               purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Health Insurance 
Access Act of 2002''.
    (b) Table of Contents.--The table of contents of this Act is as 
follows:

Sec. 1. Short title; table of contents.
   TITLE I--TAX CREDIT FOR OFFERING EMPLOYER-BASED HEALTH INSURANCE 
                                COVERAGE

Sec. 101. Credit for employee health insurance expenses.
               TITLE II--HEALTH PLAN PURCHASING ALLIANCES

Sec. 201. Grant program for State-based or State-directed health plan 
                            purchasing alliances.
Sec. 202. Private health plan purchasing alliances.
Sec. 203. Rules of construction.
Sec. 204. Enforcement.
Sec. 205. Study concerning reauthorization.
Sec. 206. Definitions.
             TITLE III--PROMOTION OF STATE HIGH RISK POOLS

Sec. 301. Promotion of State high risk pools.
    TITLE IV--OPTIONAL COVERAGE OF PARENTS AND PREGNANT WOMEN UNDER 
                           MEDICAID AND SCHIP

Sec. 401. Optional coverage of parents and pregnant women under 
                            medicaid and SCHIP.
Sec. 402. Automatic enrollment of children born to pregnant women.
TITLE V--ACCESS TO MEDICARE BENEFITS FOR INDIVIDUALS 62-TO-65 YEARS OF 
                                  AGE

Sec. 501. Access to medicare benefits for individuals 62-to-65 years of 
                            age.

   TITLE I--TAX CREDIT FOR OFFERING EMPLOYER-BASED HEALTH INSURANCE 
                                COVERAGE

SEC. 101. CREDIT FOR EMPLOYEE HEALTH INSURANCE EXPENSES.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to business-related 
credits) is amended by adding at the end the following:

``SEC. 45G. EMPLOYEE HEALTH INSURANCE EXPENSES.

    ``(a) General Rule.--For purposes of section 38, in the case of a 
qualified small employer, the employee health insurance expenses credit 
determined under this section is an amount equal to the applicable 
percentage of the amount paid by the taxpayer during the taxable year 
for qualified employee health insurance expenses.
    ``(b) Applicable Percentage.--For purposes of subsection (a), the 
applicable percentage is equal to--
            ``(1) 50 percent in the case of an employer with less than 
        26 qualified employees,
            ``(2) 40 percent in the case of an employer with more than 
        25 but less than 36 qualified employees, and
            ``(3) 30 percent in the case of an employer with more than 
        35 but less than 51 qualified employees.
    ``(c) Per Employee Dollar Limitation.--The amount of qualified 
employee health insurance expenses taken into account under subsection 
(a) with respect to any qualified employee for any taxable year shall 
not exceed the maximum employer contribution for self-only coverage or 
family coverage (as applicable) determined under section 8906(a) of 
title 5, United States Code, for the calendar year in which such 
taxable year begins.
    ``(d) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Qualified small employer.--
                    ``(A) In general.--The term `qualified small 
                employer' means any small employer which--
                            ``(i) provides eligibility for health 
                        insurance coverage (after any waiting period 
                        (as defined in section 9801(b)(4)) to all 
                        qualified employees of the employer, and
                            ``(ii) pays at least 70 percent of the cost 
                        of such coverage (60 percent in the case of 
                        family coverage) for each qualified employee.
                    ``(B) Transition rule for new plans.--
                            ``(i) In general.--If a small employer (or 
                        any predecessor) did not provide health 
                        insurance coverage to the qualified employees 
                        of the employer during the employer's 
                        precompliance period, then subparagraph (A) 
                        shall be applied to such employer for the first 
                        5 taxable years following such period by 
                        substituting `50 percent' for `70 percent' in 
                        clause (ii) (or for `60 percent' in such 
                        clause, in the case of family coverage).
                            ``(ii) Precompliance period.--For purposes 
                        of clause (i), the precompliance periods are--
                                    ``(I) the period beginning with the 
                                small employer's taxable year preceding 
                                its first taxable year beginning after 
                                the date of the enactment of this 
                                section, and
                                    ``(II) the period beginning with 
                                the small employer's taxable year 
                                preceding the first taxable year for 
                                which the employer meets the 
                                requirement of subparagraph (A)(i).
                        An employer not in existence for any period 
                        shall be treated in the same manner as an 
                        employer which is in existence and not 
                        providing coverage.
                    ``(C) Small employer.--
                            ``(i) In general.--For purposes of this 
                        paragraph, the term `small employer' means, 
                        with respect to any calendar year, any employer 
                        if such employer employed an average of not 
                        less than 2 and not more than 50 qualified 
                        employees on business days during either of the 
                        2 preceding calendar years. For purposes of the 
preceding sentence, a preceding calendar year may be taken into account 
only if the employer was in existence throughout such year.
                            ``(ii) Employers not in existence in 
                        preceding year.--In the case of an employer 
                        which was not in existence throughout the 1st 
                        preceding calendar year, the determination 
                        under clause (i) shall be based on the average 
                        number of qualified employees that it is 
                        reasonably expected such employer will employ 
                        on business days in the current calendar year.
            ``(2) Qualified employee health insurance expenses.--
                    ``(A) In general.--The term `qualified employee 
                health insurance expenses' means any amount paid by an 
                employer for health insurance coverage to the extent 
                such amount is attributable to coverage provided to any 
                employee while such employee is a qualified employee.
                    ``(B) Exception for amounts paid under salary 
                reduction arrangements.--No amount paid or incurred for 
                health insurance coverage pursuant to a salary 
                reduction arrangement shall be taken into account under 
                subparagraph (A).
                    ``(C) Health insurance coverage.--The term `health 
                insurance coverage' has the meaning given such term by 
                paragraph (1) of section 9832(b) (determined by 
                disregarding the last sentence of paragraph (2) of such 
                section).
            ``(3) Qualified employee.--The term `qualified employee' 
        means an employee of an employer who, with respect to any 
        period, is not provided health insurance coverage under--
                    ``(A) a health plan of the employee's spouse,
                    ``(B) title XVIII, XIX, or XXI of the Social 
                Security Act,
                    ``(C) chapter 17 of title 38, United States Code,
                    ``(D) chapter 55 of title 10, United States Code,
                    ``(E) chapter 89 of title 5, United States Code, or
                    ``(F) any other provision of law.
        ``(4) Employee--The term `employee'--
                    ``(A) means any individual, with respect to any 
                calendar year, who is reasonably expected to receive at 
                least $5,000 of compensation from the employer during 
                such year,
                    ``(B) does not include an employee within the 
                meaning of section 401(c)(1), and
                    ``(C) includes a leased employee within the meaning 
                of section 414(n).
            ``(5) Compensation.--The term `compensation' means amounts 
        described in section 6051(a)(3).
    ``(e) Certain Rules Made Applicable.--For purposes of this section, 
rules similar to the rules of section 52 shall apply.
    ``(f) Denial of Double Benefit.--No deduction or credit under any 
other provision of this chapter shall be allowed with respect to 
qualified employee health insurance expenses taken into account under 
subsection (a).''.
    (b) Credit To Be Part of General Business Credit.--Section 38(b) of 
the Internal Revenue Code of 1986 (relating to current year business 
credit) is amended by striking ``plus'' at the end of paragraph (14), 
by striking the period at the end of paragraph (15) and inserting ``, 
plus'', and by adding at the end the following:
            ``(16) the employee health insurance expenses credit 
        determined under section 45G.''.
    (c) Credit Allowed Against Minimum Tax.--
            (1) In general.--Subsection (c) of section 38 of the 
        Internal Revenue Code of 1986 (relating to limitation based on 
        amount of tax) is amended by redesignating paragraph (3) as 
        paragraph (4) and by inserting after paragraph (2) the 
        following new paragraph:
            ``(3) Special rules for employee health insurance credit.--
                    ``(A) In general.--In the case of the employee 
                health insurance credit--
                            ``(i) this section and section 39 shall be 
                        applied separately with respect to the credit, 
                        and
                            ``(ii) in applying paragraph (1) to the 
                        credit--
                                    ``(I) the amounts in subparagraphs 
                                (A) and (B) thereof shall be treated as 
                                being zero, and
                                    ``(II) the limitation under 
                                paragraph (1) (as modified by subclause 
                                (I)) shall be reduced by the credit 
                                allowed under subsection (a) for the 
                                taxable year (other than the employee 
                                health insurance credit).
                    ``(B) Employee health insurance credit.--For 
                purposes of this subsection, the term `employee health 
                insurance credit' means the credit allowable under 
                subsection (a) by reason of section 45G(a).''.
            (2) Conforming amendment.--Subclause (II) of section 
        38(c)(2)(A)(ii) of such Code is amended by striking ``(other'' 
        and all that follows through ``credit)'' and inserting ``(other 
        than the empowerment zone employment credit or the employee 
        health insurance credit)''.
    (d) No Carrybacks.--Subsection (d) of section 39 of the Internal 
Revenue Code of 1986 (relating to carryback and carryforward of unused 
credits) is amended by adding at the end the following:
            ``(11) No carryback of section 45g credit before effective 
        date.--No portion of the unused business credit for any taxable 
        year which is attributable to the employee health insurance 
        expenses credit determined under section 45G may be carried 
        back to a taxable year ending before the date of the enactment 
        of section 45G.''.
    (e) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 of the Internal Revenue Code of 
1986 is amended by adding at the end the following:

                              ``Sec. 45G. Employee health insurance 
                                        expenses.''.
    (f) Employer Outreach.--The Internal Revenue Service shall, in 
conjunction with the Small Business Administration, develop materials 
and implement an educational program to ensure that business personnel 
are aware of--
            (1) the eligibility criteria for the tax credit provided 
        under section 45G of the Internal Revenue Code of 1986 (as 
        added by this section),
            (2) the methods to be used in calculating such credit,
            (3) the documentation needed in order to claim such credit, 
        and
            (4) any available health plan purchasing alliances 
        established under title II,
so that the maximum number of eligible businesses may claim the tax 
credit.
    (g) Effective Date.--The amendments made by this section shall 
apply to amounts paid or incurred in taxable years beginning after the 
date of the enactment of this Act.

               TITLE II--HEALTH PLAN PURCHASING ALLIANCES

SEC. 201. GRANT PROGRAM FOR STATE-BASED OR STATE-DIRECTED HEALTH PLAN 
              PURCHASING ALLIANCES.

    (a) Program Establishment.--The Secretary shall establish a program 
to award grants to eligible entities to facilitate the development, 
establishment, and capacity, in accordance with this title, of State-
based or State-directed health plan purchasing alliances (or other 
similar health plan purchasing pools) for purposes of creating greater 
access to lower-cost health benefits for small employer groups and 
individuals.
    (b) Application Requirements.--An eligible entity shall not be 
awarded a grant under this title unless the eligible entity--
            (1) prepares and submits to the Secretary an application, 
        at such time, in such manner, and containing such information 
        and assurances as the Secretary may require (including evidence 
        of compliance with applicable requirements of this title);
            (2) in the case of an eligible entity described in 
        subparagraph (B) or (C) of section 206(1), provides 
        documentation to the Secretary of a determination by the chief 
        executive officer of each State involved that the proposed 
        project is in the best interests of the State; and
            (3) in the case of an entity described in subparagraph (A) 
        of section 206(1), provides documentation to the Secretary that 
        the entity has provided notification to an eligible small 
        employer (as defined in section 45G(d)(1) of the Internal 
        Revenue Code of 1986 (as added by section 101)) located in the 
        State of--
                    (A) the availability of the employee health 
                insurance expenses credit provided under section 45G of 
                such Code; and
                    (B) the existence of State-based or State-directed 
                health plan purchasing alliances (or other similar 
                health plan purchasing pools) in the State; and
            (4) otherwise complies with the provisions of subsections 
        (b) through (f) of section 202.
    (c) Use of Funds.--
            (1) Development and establishment of alliances.--
                    (A) In general.--Except as provided in subparagraph 
                (B), funds made available under a grant made under this 
                section may be used by the grantee to pay the costs 
                associated with the development and establishment of a 
                health plan purchasing alliance, the provision of 
                technical assistance concerning the alliance, and the 
                capitalization of the alliance.
                    (B) Exception.--With respect to funds made 
                available under a grant made under this section that 
                are used to develop and establish a health plan 
                purchasing alliance, such funds may only be used for 
                the operating costs of the health plan purchasing 
                alliance for the first 6 months after the date on which 
                the alliance is established.
            (2) Development of capacity of existing alliances.--Funds 
        made available under a grant made under this section may be 
        used by the grantee to pay the costs associated with developing 
        the capacity of a State-based or State-directed health plan 
        purchasing alliance (or other similar health plan purchasing 
        pool) that is in existence as of the date on which the grant is 
        made to coordinate the services offered under the alliance with 
        other Federal or State funds or subsidies that are designed to 
        create access to lower-cost health benefits, including the 
        employee health insurance expenses credit provided under 
        section 45G of the Internal Revenue Code of 1986 (as added by 
        section 101).
    (d) Limitations.--
            (1) In general.--The Secretary shall not award more than 2 
        grants under this section with respect to each State.
            (2) State agencies.--The Secretary shall not award more 
        than 1 grant under this section to an entity that is described 
        in section 206(1)(A) with respect to a State.
    (e) Funding.--There are appropriated to the Secretary for the 
purpose of awarding grants under this title, not more than--
            (1) $20,000,000 for fiscal year 2002; and
            (2) $80,000,000 for each of fiscal years 2003 through 2006.
    (f) Duration.--The grant period for a grant awarded under this 
section shall not exceed 30 months.

SEC. 202. PRIVATE HEALTH PLAN PURCHASING ALLIANCES.

    (a) Certification.--
            (1) In general.--In order to be certified as a health plan 
        purchasing alliance under this title, the following 
        requirements must be met:
                    (A) Request.--A coalition of small employer groups 
                (or a coalition made up of a group of individuals and 1 
or more small employer groups) shall submit to the State a request for 
certification as a health plan purchasing alliance.
                    (B) State determinations.--The State shall--
                            (i) determine that the coalition meets the 
                        requirements of this title in a timely manner; 
                        and
                            (ii) ensure continued compliance with the 
                        requirements of this title.
                    (C) Registration.--Each certified health plan 
                purchasing alliance shall be registered with the 
                Secretary.
            (2) State failure to implement a certification program.--
                    (A) In general.--Except as provided in subparagraph 
                (B), if a State fails to implement a program for the 
                certification of health plan purchasing alliances in 
                accordance with the requirements of this section, the 
                Secretary shall certify and oversee the operations of 
                alliances in the State.
                    (B) Exception.--The Secretary shall not certify a 
                health plan purchasing alliance in a State which, as of 
                the date of enactment of this Act, has enacted a law 
                that facilitates group purchasing of health benefits 
                for small employers or individuals, but only if the law 
                ensures that--
                            (i) individuals and employees have a choice 
                        of multiple, unaffiliated health plan issuers;
                            (ii) health plan coverage is subject to 
                        State premium rating requirements that are not 
                        based on the factors described in subsection 
                        (e)(3), that ensure a fair rating in a manner 
                        so that premiums shall be reasonable relative 
                        to rates, and that contain a mandatory minimum 
                        loss ratio;
                            (iii) comparative health plan materials are 
                        disseminated consistent with subsection 
                        (d)(1)(D); and
                            (iv) the objectives of this title are 
                        otherwise met.
            (3) Interstate alliances.--
                    (A) In general.--A health plan purchasing alliance 
                operating in more than 1 State shall be certified in 
                each State in which it operates and shall comply with 
                the laws of each such State.
                    (B) Operation.--States may enter into alliance 
                agreements for the purpose of overseeing the operation 
                of a health plan purchasing alliance operating in more 
                than 1 State.
                    (C) Domicile.--For purposes of this paragraph, a 
                health plan purchasing alliance operating in more than 
                1 State shall be considered to be domiciled in the 
                State in which most of the members of the alliance 
                reside, as determined as of the date on which the 
                alliance is first established.
    (b) Board of Directors.--
            (1) In general.--Each health plan purchasing alliance shall 
        be governed by a board of directors that shall be responsible 
        for ensuring the performance of the duties of the alliance 
        under this section. The board shall be composed of 
        representatives of employers, employees, and individuals 
        participating in the alliance.
            (2) Interstate alliances.--In the case of a health plan 
        purchasing alliance operating in more than 1 State, the board 
        of directors governing the alliance shall include 
        representatives from each State participating in the alliance.
            (3) Limitation on compensation.--A health plan purchasing 
        alliance may not provide compensation to members of the board 
        of directors of the alliance. The alliance may provide 
        reimbursements to such members for the reasonable and necessary 
        expenses incurred by the members in the performance of their 
        duties as members of the board.
    (c) Membership and Marketing Area.--
            (1) Membership.--A health plan purchasing alliance shall 
        determine whether to permit individuals to become members. Upon 
        the establishment of membership criteria, the alliance shall, 
        except as provided in paragraph (2), accept all employers, 
        employees, and individuals residing within the area served by 
        the alliance who meet such requirements as members on a first-
        come, first-served basis, or on another basis established by 
        the State to ensure equitable access to the alliance. The 
        purchasing alliance shall not discriminate or deny membership 
        on the basis of health status, age, race, sex, occupation, or 
        insurability.
            (2) Marketing area.--A State may establish rules regarding 
        the geographic area that must be served by health plan 
        purchasing alliances to ensure that alliances do not 
        discriminate on the basis of the health status or insurability 
        of the populations that reside in the area served. A State may 
        not use such rules to limit arbitrarily the number of health 
        plan purchasing alliances.
    (d) Duties and Responsibilities.--
            (1) In general.--A health plan purchasing alliance shall--
                    (A) objectively evaluate potential health plan 
                issuers and enter into agreements with multiple, 
                unaffiliated health plan issuers, except that the 
                requirement of this subparagraph shall not apply in 
                regions (such as remote or frontier areas) in which 
                compliance with such requirement is not possible;
                    (B) prepare and disseminate comparative health plan 
                materials (including information about cost, quality, 
                benefits, and other information determined necessary by 
                the State to permit a comparison of all health plans 
                offered through the alliance to small employers, 
                employees, and individuals);
                    (C) actively market to all eligible employers and 
                individuals residing within the service area;
                    (D) act as an ombudsman on behalf of group health 
                plan or individual health plan enrollees; and
                    (E) coordinate and provide for an open enrollment 
                period of at least 30 days per calendar year for 
                participating employers and individuals.
            (2) Permissible activities.--A health plan purchasing 
        alliance may perform such other functions as necessary to 
        further the purposes of this title, and may--
                    (A) collect and distribute premiums and perform 
                other administrative functions;
                    (B) conduct surveys of enrollee satisfaction or 
                grievances;
                    (C) charge membership fees to enrollees and charge 
                participation fees to alliance health plan issuers, but 
                only if such fees are not based on health status; and
                    (D) negotiate with health care providers and health 
                plan issuers.
    (e) Limitations on Activities.--A health plan purchasing alliance 
shall not--
            (1) perform any activity related to the licensing of health 
        plan issuers;
            (2) assume financial risk directly or indirectly on behalf 
        of members of a health plan purchasing alliance relating to any 
        group health plan or individual health plan;
            (3) establish eligibility, enrollment, or premium 
        contribution requirements for participants or beneficiaries in 
        health plans based on health status, medical condition, claims 
        experience, receipt of health care, medical history, evidence 
        of insurability, genetic information, or disability;
            (4) operate on a for-profit or other basis where the legal 
        structure of the alliance permits profits to be made and not 
        returned to the members of the alliance; or
            (5) perform any other activities that are described in 
        subsection (f) or that are otherwise inconsistent with the 
        performance of its duties under this title.
    (f) Conflict of Interest.--
            (1) Prohibitions.--No individual, partnership, or 
        corporation shall serve on the board of directors of a health 
        plan purchasing alliance, be employed by such an alliance, 
        receive compensation from such an alliance, or initiate or 
        finance such an alliance if such individual, partnership, or 
        corporation--
                            (i) fails to discharge the duties and 
                        responsibilities in a manner that is solely in 
                        the interest of the alliance and the members of 
                        the alliance;
                            (ii) derives personal financial benefit 
                        (other than ordinary compensation received) 
                        from the sale of the alliance, or has a 
                        financial interest in health plans or related 
                        financial entities, services or products sold 
                        by or distributed through that alliance; or
                            (iii) serves as a member of the board of 
                        directors of any organization doing business 
                        with, competing with, or exercising authority 
                        over the alliance.
            (2) Contracts with third parties.--Nothing in subparagraph 
        (A) shall be construed to prohibit the board of directors of a 
        health plan purchasing alliance, or its officers from 
        contracting with third parties to provide administrative, 
        marketing, consultative, or other services on behalf of the 
        alliance.
    (g) Limited Preemption of Certain State Laws.--
            (1) In general.--Any State law that sets restrictions on 
        the organization of groups for the purpose of purchasing health 
        insurance, or that prohibits groups from combining for that 
        purpose, is preempted with respect to an alliance that meets 
        the requirements of this title.
            (2) Health plan issuers.--
                    (A) Rating.--Except as provided in subparagraph 
                (B), a health plan issuer offering a group health plan 
                or individual health plan through a health plan 
                purchasing alliance certified under this title shall 
                comply with all State rating requirements that would 
                otherwise apply if the health plan was offered outside 
                of the alliance.
                    (B) Premium rate exception.--
                            (i) In general.--A State law that imposes 
                        premium rate requirements is preempted to the 
                        extent that such law would prohibit a health 
                        plan issuer from reducing premium rates under 
                        an agreement with a health plan purchasing 
                        alliance certified under this title to reflect 
                        the savings derived by the issuer from 
                        reductions in administrative costs, marketing 
                        costs, profit margins, economies of scale, or 
                        from other factors.
                            (ii) Limitation.--Clause (i) shall not 
                        apply where the reduction in premium rates is 
                        based on the health status, demographic 
                        factors, industry type, duration, or other 
                        indicators of health risk of the members of the 
                        alliance involved.
                    (C) Alternative benefit plan exception.--State laws 
                authorizing the issuance of alternative benefit plans 
                to small employers may be applied to health plan 
                issuers offering such alternative benefit plans through 
                a health plan purchasing alliance certified under this 
                title.

SEC. 203. RULES OF CONSTRUCTION.

    Nothing in this title shall be construed to--
            (1) require that a State organize, operate, or otherwise 
        create health plan purchasing alliances;
            (2) otherwise require the establishment of health plan 
        purchasing alliances;
            (3) require individuals, plan sponsors, or employers to 
        purchase health insurance plans through a health plan 
        purchasing alliance;
            (4) preempt a State from requiring licensure for 
        individuals who are involved in directly supplying advice or 
        selling health plans on behalf of a purchasing alliance;
            (5) limit purchasing arrangements operated in a State to 
        the health plan purchasing alliances established in accordance 
        with this title;
            (6) confer authority upon a State that the State would not 
        otherwise have to regulate health plan issuers or employee 
        health benefits plans;
            (7) confer authority upon a State (or the Federal 
        Government) that the State (or Federal Government) would not 
        otherwise have to regulate group purchasing arrangements, 
        coalitions, association plans, or other similar entities that 
        do not desire to become a health plan purchasing alliance in 
        accordance with this section;
            (8) preempt a State law if such law prohibits the variance 
        of premium rates of employers, employees, or individuals 
        participating as members in a health purchasing alliance in 
        excess of the amount of such variations that would be permitted 
        under such State laws among individuals, employers, and 
        employees that are not participating in the health plan 
        purchasing alliance; or
            (9) except as specifically provided otherwise in this 
        subsection, prevent the application of State laws and 
        regulations otherwise applicable to health plan issuers 
        offering group health plans or individual health plans through 
        a health plan purchasing alliance.

SEC. 204. ENFORCEMENT.

    For purposes of enforcement only, the requirements of parts 4 and 5 
of subtitle B of title I of the Employee Retirement Income Security Act 
of 1974 (29 U.S.C. 1101 et seq.) shall apply to a health plan 
purchasing alliance certified by the Secretary under section 202(a)(2) 
of this title as if such alliance were an employee welfare benefit 
plan.

SEC. 205. STUDY CONCERNING REAUTHORIZATION.

    (a) Study.--The Secretary shall conduct a study to determine 
whether the grant program established under this title should be 
reauthorized for fiscal years after fiscal year 2006.
    (b) Report.--Not later than 2 years after the date of enactment of 
this Act, the Secretary shall prepare and submit to the appropriate 
committees of Congress, a report concerning the results of the study 
conducted under subsection (a). Such report shall include--
            (1) the recommendations of the Secretary with respect to 
        the reauthorization of the grant program established under this 
        section; and
            (2) the effect of the implementation of this title on--
                    (A) reducing the number of uninsured individuals;
                    (B) premium rates paid by small employers and 
                individuals; and
                    (C) the level of health benefits offered by health 
                insurance issuers.

SEC. 206. DEFINITIONS.

    In this title:
            (1) Eligible entities.--The term ``eligible entity'' means 
        an entity that is--
                    (A) a State agency;
                    (B) a nonprofit entity organized for the purpose of 
                establishing a health plan purchasing alliance; or
                    (C) a for-profit cooperative organization whose 
                profits are shared on a pro-rata basis among the 
                members of the cooperative.
            (2) Health plan purchasing alliance.--The term ``health 
        plan purchasing alliance'' means a State agency (or a 
        consortium of State agencies on behalf of more than 1 State) or 
        employer groups that, on a voluntary basis and in accordance 
        with this title, form an alliance for the purpose of purchasing 
        insurance plans offered by health insurance plan issuers.
            (3) Secretary.--The term ``Secretary'' means the Secretary 
        of Health and Human Services.
            (4) Small employer group.--The term ``small employer 
        group'' means all employees employed by the same employer. The 
        maximum number of employees in the small employer group shall 
        not exceed 50 full time equivalent employees.
            (5) State.--The term ``State'' means the 50 States, the 
        District of Columbia, and the Commonwealth of Puerto Rico.

             TITLE III--PROMOTION OF STATE HIGH RISK POOLS

SEC. 301. PROMOTION OF STATE HIGH RISK POOLS.

    (a) In General.--Title XXVII of the Public Health Service Act is 
amended by inserting after section 2744 the following new section:

``SEC. 2745. PROMOTION OF QUALIFIED HIGH RISK POOLS.

    ``(a) Seed Grants to States.--The Secretary shall establish a 
program to award grants of up to $1,000,000 to each State that has not 
created a qualified high risk pool as of the date of the enactment of 
this section for the State's costs of creation and initial operation of 
such a pool.
    ``(b) Matching Funds for Operation of Pools.--
            ``(1) In general.--In the case of a State that has 
        established a qualified high risk pool that restricts premiums 
        charged under the pool to not more than 150 percent of the 
        premium for applicable standard risk rates and that offers a 
        choice of 2 or more coverage options through the pool, from the 
        funds appropriated under subsection (c) for a fiscal year and 
        allotted to the State under paragraph (2), the Secretary shall 
        provide a grant of up to 50 percent of the losses incurred by 
        the State in connection with the operation of the pool.
            ``(2) Allotment.--The amounts appropriated under subsection 
        (c) (other than amounts used to make grants under subsection 
        (a)) for a fiscal year, shall be allotted to each State based 
        on the proportion of uninsured individuals in the State as 
        compared to all individuals in the State.
            ``(3) Construction.--Nothing in this subsection shall be 
        construed as preventing a State from supplementing the funds 
        made available under this subsection for the support and 
        operation of qualified high risk pools.
    ``(c) Funding.--
            ``(1) In general.--There are appropriated to carry out this 
        section, not more than--
                    ``(A) $20,000,000 for fiscal year 2002; and
                    ``(B) $50,000,000 for each of fiscal years 2003 
                through 2006.
            ``(2) Availability.--Funds appropriated under paragraph (1) 
        for a fiscal year shall remain available for obligation through 
        the end of the following fiscal year.
    ``(d) Qualified High Risk Pool and State Defined.--For purposes of 
this section, the term `qualified high risk pool' has the meaning given 
such term in section 2744(c)(2) and the term `State' means any of the 
50 States, the District of Columbia, and the Commonwealth of Puerto 
Rico.''.
    (b) Construction.--Nothing in section 2745 of the Public Health 
Service Act (as added by subsection (a)) shall be construed as 
affecting the ability of a State to use mechanisms, described in 
sections 2741(c) and 2744 of the Public Health Service Act (42 U.S.C. 
300gg-41(c), 300gg-44), as an alternative to applying the guaranteed 
availability provisions of section 2741(a) of such Act (42 U.S.C. 
300gg-41(a)).
    (c) Study Concerning Reauthorization.--
            (1) Study.--The Secretary of Health and Human Services 
        shall conduct a study to determine whether the grant program 
        established under this title should be reauthorized for fiscal 
        years after fiscal year 2006.
            (2) Report.--Not later than 2 years after the date of 
        enactment of this Act, the Secretary of Health and Human 
        Services shall prepare and submit to the appropriate committees 
        of Congress, a report concerning the results of the study 
        conducted under paragraph (1). Such report shall include--
                    (A) the recommendations of the Secretary with 
                respect to the reauthorization of the grant program 
                established under section 2745 of the Public Health 
                Service Act (as added by this section);
                    (B) a description of how amounts were used under 
                such section; and
                    (C) the effect of the implementation of such grant 
                program on--
                            (i) reducing the number of uninsured 
                        individuals;
                            (ii) premium rates; and
                            (iii) the level of health benefits offered 
                        by health insurance issuers.

    TITLE IV--OPTIONAL COVERAGE OF PARENTS AND PREGNANT WOMEN UNDER 
                           MEDICAID AND SCHIP

SEC. 401. OPTIONAL COVERAGE OF PARENTS AND PREGNANT WOMEN UNDER 
              MEDICAID AND SCHIP.

    (a) Incentives To Implement Coverage of Parents.--
            (1) Under medicaid.--
                    (A) Establishment of new optional eligibility 
                category.--Section 1902(a)(10)(A)(ii) of the Social 
                Security Act (42 U.S.C. 1396a(a)(10)(A)(ii)) is 
                amended--
                            (i) by striking ``or'' at the end of 
                        subclause (XVII);
                            (ii) by adding ``or'' at the end of 
                        subclause (XVIII); and
                            (iii) by adding at the end the following:
                                    ``(XIX) who are individuals 
                                described in subsection (k)(1) 
                                (relating to parents of categorically 
                                eligible children);''.
                    (B) Parents described.--Section 1902 of the Social 
                Security Act (42 U.S.C. 1396a) is further amended by 
                inserting after subsection (j) the following:
    ``(k)(1)(A) Individuals described in this paragraph are 
individuals--
            ``(i) who are the parents of an individual who is under 19 
        years of age and who is eligible for medical assistance under 
        subsection (a)(10)(A);
            ``(ii) who are not eligible for medical assistance under 
        such subsection, under a waiver approved under section 1115, or 
        otherwise (except under section 1931 or under subsection 
        (a)(10)(A)(ii)(XIX)); and
            ``(iii) whose family income or resources exceed the 
        effective income or resource level applicable under the State 
        plan under part A of title IV as in effect as of July 16, 1996, 
        but does not exceed the highest effective income level 
        applicable to a child in the family under this title.
    ``(B) In establishing an income eligibility level for individuals 
described in this paragraph, a State may vary such level consistent 
with the various income levels established under subsection (l)(2) in 
order to ensure, to the maximum extent possible, that such individuals 
shall be enrolled in the same program as their children.
    ``(C) An individual may not be treated as being described in this 
paragraph unless, at the time of the individual's enrollment under this 
title, the child referred to in subparagraph (A)(i) of the individual 
is also enrolled under this title.
    ``(D) In this subsection, the term `parent' has the meaning given 
the term `caretaker relative' for purposes of carrying out section 
1931.
    ``(2) In the case of a parent described in paragraph (1) who is 
also the parent of a child who is eligible for child health assistance 
under title XXI, the State may elect (on a uniform basis) to cover all 
such parents under section 2111 or under this title.''.
                    (C) Enhanced matching funds available if certain 
                conditions met.--Section 1905 of the Social Security 
                Act (42 U.S.C. 1396d) is amended--
                            (i) in the fourth sentence of subsection 
                        (b), by striking ``or subsection (u)(3)'' and 
inserting ``, (u)(3), or (u)(4)''; and
                            (ii) in subsection (u)--
                                    (I) by redesignating paragraph (4) 
                                as paragraph (6); and
                                    (II) by inserting after paragraph 
                                (3) the following:
    ``(4) For purposes of subsection (b) and section 2105(a), the 
expenditures described in this paragraph are the expenditures described 
in the following subparagraphs (A) and (B):
            ``(A) Parents.--If the conditions described in subparagraph 
        (C)(i) are met, expenditures for medical assistance for parents 
        described in section 1902(k)(1) and for parents who would be 
        described in such section but for the fact that they are 
        eligible for medical assistance under a waiver approved under 
        section 1115.
            ``(B) Certain pregnant women.--If the conditions described 
        in subparagraph (C)(ii) are met, expenditures for medical 
        assistance for pregnant women described in subsection (n) or 
        under section 1902(l)(1)(A) in a family the income of which 
        exceeds 133 percent of the poverty line.
            ``(C) Conditions.--
                    ``(i) Expenditures for parents.--The conditions 
                described in this clause are the following:
                            ``(I) The State child health plan under 
                        title XXI (whether implemented under that title 
                        or under this title) does not limit the 
                        acceptance of applications, does not use a 
                        waiting list for children who meet eligibility 
                        standards to qualify for assistance, and 
                        provides benefits to all children in the State 
                        who apply for and meet eligibility standards.
                            ``(II) The State plans under this title and 
                        title XXI do not provide coverage for parents 
                        described in subparagraph (A) with higher 
                        family income without covering such parents 
                        with a lower family income.
                            ``(III) The State does not apply an income 
                        level for parents that is lower than the 
                        effective income level (expressed as a percent 
                        of the poverty line and considering applicable 
                        income disregards) that has been specified 
                        under the State plan under this title 
                        (including under a waiver authorized by the 
                        Secretary or under section 1902(r)(2)), as of 
                        January 1, 2002, to be eligible for medical 
                        assistance as a parent under this title.
                    ``(ii) Expenditures for certain pregnant women.--
                The conditions described in this clause are the 
                following:
                            ``(I) The State plans under this title and 
                        title XXI do not provide coverage for pregnant 
                        women described in subparagraph (B) with higher 
                        family income without covering such pregnant 
                        women with a lower family income.
                            ``(II) The State does not apply an income 
                        level for pregnant women that is lower than the 
                        effective income level (expressed as a percent 
                        of the poverty line and considering applicable 
                        income disregards) that has been specified 
                        under the State plan under subsection 
                        (a)(10)(A)(i)(III) or (l)(2)(A) of section 
                        1902, as of January 1, 2002, to be eligible for 
                        medical assistance as a pregnant woman.
                            ``(III) The State satisfies the condition 
                        described in clause (i)(I).
            ``(D) Definitions.--In this paragraph:
                    ``(i) The term `parent' has the meaning given the 
                term `caretaker relative' for purposes of carrying out 
                section 1931.
                    ``(ii) The term `poverty line' has the meaning 
                given such term in section 2110(c)(5).''.
                    (D) Appropriation from title xxi allotment for 
                medicaid expansion costs for parents; elimination of 
                counting medicaid child presumptive eligibility costs 
                against title xxi allotment.--Section 2105(a)(1)(B) of 
                the Social Security Act (42 U.S.C. 1397ee(a)(1)(B)) is 
                amended to read as follows:
                    ``(B) for the provision of medical assistance that 
                is attributable to expenditures described in 
                subparagraph (A) or (B) of section 1905(u)(4);''.
                    (E) Rules for counting only enhanced portion of 
                certain expenditures for coverage of pregnant women 
                against a state's title xxi allotment.--Section 1905 of 
                the Social Security Act (42 U.S.C. 1396d), as amended 
                by subparagraph (C), is amended--
                            (i) in the fourth sentence of subsection 
                        (b), by inserting ``(except in the case of 
                        expenditures described in subsection (u)(5))'' 
                        after ``do not exceed''; and
                            (ii) in subsection (u), by inserting after 
                        paragraph (4), the following:
    ``(5) For purposes of the fourth sentence of subsection (b) and 
section 2105(a), the following payments under this title do not count 
against a State's allotment under section 2104:
            ``(A) Regular fmap for expenditures for coverage of 
        pregnant women that exceeds 133 percent of poverty.--With 
        respect to expenditures described in paragraph (4)(B), the 
        portion of the payments made for such expenditures that 
        represents the amount that would have been paid for such 
        expenditures if the enhanced FMAP had not been substituted for 
        the Federal medical assistance percentage.''.
            (2) Under title xxi.--
                    (A) Coverage.--Title XXI of the Social Security Act 
                (42 U.S.C. 1397aa et seq.) is amended by adding at the 
                end the following:

``SEC. 2111. OPTIONAL COVERAGE OF PARENTS OF TARGETED LOW-INCOME 
              CHILDREN OR TARGETED LOW-INCOME PREGNANT WOMEN.

    ``(a) Optional Coverage.--Notwithstanding any other provision of 
this title, a State may provide for coverage, through an amendment to 
its State child health plan under section 2102, of parent health 
assistance for targeted low-income parents, pregnancy-related 
assistance for targeted low-income pregnant women, or both, in 
accordance with this section, but only if--
            ``(1) with respect to the provision of parent health 
        assistance, the State meets the conditions described in clause 
        (i) of section 1905(u)(4)(C);
            ``(2) with respect to the provision of pregnancy-related 
        assistance, the State meets the conditions described in clause 
        (ii) of section 1905(u)(4)(C); and
            ``(3) in the case of parent health assistance for targeted 
        low-income parents, the State elects to provide medical 
        assistance under section 1902(a)(10)(A)(ii)(XIX), under section 
        1931, or under a waiver under section 1115 to individuals 
        described in section 1902(k)(1)(A)(i) and elects an effective 
        income level that, consistent with paragraphs (1)(B) and (2) of 
        section 1902(k), ensures to the maximum extent possible, that 
        such individuals shall be enrolled in the same program as their 
        children if their children are eligible for coverage under 
        title XIX (including under a waiver authorized by the Secretary 
        or under section 1902(r)(2)).''.
    ``(b) Definitions.--For purposes of this title:
            ``(1) Parent health assistance.--The term `parent health 
        assistance' has the meaning given the term child health 
        assistance in section 2110(a) as if any reference to targeted 
        low-income children were a reference to targeted low-income 
        parents.
            ``(2) Parent.--The term `parent' has the meaning given the 
        term `caretaker relative' for purposes of carrying out section 
        1931.
            ``(3) Pregnancy-related assistance.--The term `pregnancy-
        related assistance' has the meaning given the term child health 
        assistance in section 2110(a) as if any reference to targeted 
        low-income children were a reference to targeted low-income 
        pregnant women, except that the assistance shall be limited to 
        services related to pregnancy (which include prenatal, 
        delivery, and postpartum services) and to other conditions that 
        may complicate pregnancy.
            ``(4) Targeted low-income parent.--The term `targeted low-
        income parent' has the meaning given the term targeted low-
        income child in section 2110(b) as if any reference to a child 
        were a reference to a parent (as defined in paragraph (2)) of 
        the child; except that in applying such section--
                    ``(A) there shall be substituted for the income 
                level described in paragraph (1)(B)(ii)(I) the 
                applicable income level in effect for a targeted low-
                income child;
                    ``(B) in paragraph (3), January 1, 2002, shall be 
                substituted for July 1, 1997; and
                    ``(C) in paragraph (4), January 1, 2002, shall be 
                substituted for March 31, 1997.
            ``(5) Targeted low-income pregnant woman.--The term 
        `targeted low-income pregnant woman' has the meaning given the 
        term targeted low-income child in section 2110(b) as if any 
        reference to a child were a reference to a woman during 
        pregnancy and through the end of the month in which the 60-day 
        period beginning on the last day of her pregnancy ends; except 
        that in applying such section--
                    ``(A) there shall be substituted for the income 
                level described in paragraph (1)(B)(ii)(I) the 
                applicable income level in effect for a targeted low-
                income child;
                    ``(B) in paragraph (3), January 1, 2002, shall be 
                substituted for July 1, 1997; and
                    ``(C) in paragraph (4), January 1, 2002, shall be 
                substituted for March 31, 1997.
    ``(c) References to Terms and Special Rules.--In the case of, and 
with respect to, a State providing for coverage of parent health 
assistance to targeted low-income parents or pregnancy-related 
assistance to targeted low-income pregnant women under subsection (a), 
the following special rules apply:
            ``(1) Any reference in this title (other than in subsection 
        (b)) to a targeted low-income child is deemed to include a 
        reference to a targeted low-income parent or a targeted low-
        income pregnant woman (as applicable).
            ``(2) Any such reference to child health assistance--
                    ``(A) with respect to such parents is deemed a 
                reference to parent health assistance; and
                    ``(B) with respect to such pregnant women, is 
                deemed a reference to pregnancy-related assistance.
            ``(3) In applying section 2103(e)(3)(B) in the case of a 
        family or pregnant woman provided coverage under this section, 
        the limitation on total annual aggregate cost-sharing shall be 
        applied to the entire family or such pregnant woman.
            ``(4) In applying section 2110(b)(4), any reference to 
        `section 1902(l)(2) or 1905(n)(2) (as selected by a State)' is 
        deemed a reference to the effective income level applicable to 
        parents under section 1931 or a waiver approved under section 
        1115, or, in the case of a pregnant woman, the income level 
        established under section 1902(l)(2)(A).
            ``(5) In applying section 2102(b)(3)(B), any reference to 
        children found through screening to be eligible for medical 
        assistance under the State medicaid plan under title XIX is 
        deemed a reference to parents and pregnant women.''.
                    (B) Additional allotments for providing coverage of 
                parents or pregnant women.--
                            (i) In general.--Section 2104 of the Social 
                        Security Act (42 U.S.C. 1397dd) is amended by 
                        inserting after subsection (c) the following:
    ``(d) Additional Allotments for Providing Coverage of Parents or 
Pregnant Women.--
            ``(1) Appropriation; total allotment.--For the purpose of 
        providing additional allotments to States under this title, 
        there is appropriated, out of any money in the Treasury not 
        otherwise appropriated, for each of fiscal years 2003 through 
        2007, $4,000,000,000.
            ``(2) State and territorial allotments.--In addition to the 
        allotments provided under subsections (b) and (c), subject to 
        paragraph (3), of the amount available for the additional 
        allotments under paragraph (1) for a fiscal year, the Secretary 
        shall allot to each State with a State child health plan 
        approved under this title--
                    ``(A) in the case of such a State other than a 
                commonwealth or territory described in subparagraph 
                (B), the same proportion as the proportion of the 
                State's allotment under subsection (b) (determined 
                without regard to subsection (f)) to 98.95 percent of 
                the total amount of the allotments under such section 
                for such States eligible for an allotment under this 
                paragraph for such fiscal year; and
                    ``(B) in the case of a commonwealth or territory 
                described in subsection (c)(3), the same proportion as 
                the proportion of the commonwealth's or territory's 
                allotment under subsection (c) (determined without 
                regard to subsection (f)) to 1.05 percent of the total 
                amount of the allotments under such section for 
                commonwealths and territories eligible for an allotment 
                under this paragraph for such fiscal year.
            ``(3) Use of additional allotment.--Additional allotments 
        provided under this subsection are not available for amounts 
        expended before October 1, 2002. Such amounts are available for 
        amounts expended on or after such date for child health 
        assistance for targeted low-income children, as well as for 
        parent health assistance for targeted low-income parents, and 
        pregnancy-related assistance for targeted low-income pregnant 
        women.''.
                            (ii) Conforming amendments.--Section 2104 
                        of the Social Security Act (42 U.S.C. 1397dd) 
                        is amended--
                                    (I) in subsection (a), by inserting 
                                ``subject to subsection (d),'' after 
                                ``under this section,'';
                                    (II) in subsection (b)(1), by 
                                inserting ``and subsection (d)'' after 
                                ``Subject to paragraph (4)''; and
                                    (III) in subsection (c)(1), by 
                                inserting ``subject to subsection 
                                (d),'' after ``for a fiscal year,''.
                    (C) No cost-sharing for pregnancy-related 
                benefits.--Section 2103(e)(2) of the Social Security 
                Act (42 U.S.C. 1397cc(e)(2)) is amended--
                            (i) in the heading, by inserting ``and 
                        pregnancy-related services'' after ``preventive 
                        services''; and
                            (ii) by inserting before the period at the 
                        end the following: ``and for pregnancy-related 
                        services''.
    (b) Conforming Amendments.--
            (1) Eligibility categories.--Section 1905(a) of the Social 
        Security Act (42 U.S.C. 1396d(a)) is amended, in the matter 
        before paragraph (1)--
                    (A) by striking ``or'' at the end of clause (xii);
                    (B) by inserting ``or'' at the end of clause 
                (xiii); and
                    (C) by inserting after clause (xiii) the following:
            ``(xiv) who are parents described in section 1902(k)(1),''.
            (2) Income limitations.--Section 1903(f)(4) of the Social 
        Security Act (42 U.S.C. 1396b(f)(4)) is amended by inserting 
        ``1902(a)(10)(A)(ii)(XIX),'' after 
        ``1902(a)(10)(A)(ii)(XVIII),''.
            (3) Conforming amendment relating to no waiting period for 
        certain women.--Section 2102(b)(1)(B) of the Social Security 
        Act (42 U.S.C. 1397bb(b)(1)(B)) is amended--
                    (A) by striking ``, and'' at the end of clause (i) 
                and inserting a semicolon;
                    (B) by striking the period at the end of clause 
                (ii) and inserting ``; and''; and
                    (C) by adding at the end the following:
                            ``(iii) may not apply a waiting period 
                        (including a waiting period to carry out 
                        paragraph (3)(C)) in the case of a targeted 
                        low-income pregnant woman.''.
    (c) Effective Date.--The amendments made by this section apply to 
items and services furnished on or after October 1, 2002, whether or 
not regulations implementing such amendments have been issued.

SEC. 402. AUTOMATIC ENROLLMENT OF CHILDREN BORN TO PREGNANT WOMEN.

    (a) Title XXI.--Section 2102(b)(1) of the Social Security Act (42 
U.S.C. 1397bb(b)(1)) is amended by adding at the end the following:
                    ``(C) Automatic eligibility of children born to 
                pregnant women.--Such eligibility standards shall 
                provide for automatic coverage of a child born to an 
                individual who is provided assistance under this title 
                in the same manner as medical assistance would be 
                provided under section 1902(e)(4) to a child described 
                in such section.''.
    (b) Conforming Amendment to Medicaid.--Section 1902(e)(4) of the 
Social Security Act (42 U.S.C. 1396a(e)(4)) is amended in the first 
sentence by striking ``so long as the child is a member of the woman's 
household and the woman remains (or would remain if pregnant) eligible 
for such assistance''.

TITLE V--ACCESS TO MEDICARE BENEFITS FOR INDIVIDUALS 62-TO-65 YEARS OF 
                                  AGE

SEC. 501. ACCESS TO MEDICARE BENEFITS FOR INDIVIDUALS 62-TO-65 YEARS OF 
              AGE.

    (a) In General.--Title XVIII of the Social Security Act is 
amended--
            (1) by redesignating section 1859 and part D as section 
        1858 and part E, respectively; and
            (2) by inserting after such section the following new part:

 ``Part D--Purchase of Medicare Benefits by Certain Individuals Age 62-
                           to-65 Years of Age

``SEC. 1859. PROGRAM BENEFITS; ELIGIBILITY.

    ``(a) Entitlement to Medicare Benefits For Enrolled Individuals.--
            ``(1) In general.--An individual enrolled under this part 
        is entitled to the same benefits under this title as an 
        individual entitled to benefits under part A and enrolled under 
        part B.
            ``(2) Definitions.--For purposes of this part:
                    ``(A) Federal or state cobra continuation 
                provision.--The term `Federal or State COBRA 
                continuation provision' has the meaning given the term 
                `COBRA continuation provision' in section 2791(d)(4) of 
                the Public Health Service Act and includes a comparable 
                State program, as determined by the Secretary.
                    ``(B) Federal health insurance program defined.--
                The term `Federal health insurance program' means any 
                of the following:
                            ``(i) Medicare.--Part A or part B of this 
                        title (other than by reason of this part).
                            ``(ii) Medicaid.--A State plan under title 
                        XIX.
                            ``(iii) SCHIP.--A State plan under title 
                        XXI.
                            ``(iv) FEHBP.--The Federal employees health 
                        benefit program under chapter 89 of title 5, 
                        United States Code.
                            ``(v) TRICARE.--The TRICARE program (as 
                        defined in section 1072(7) of title 10, United 
                        States Code).
                            ``(vi) Active duty military.--Health 
                        benefits under title 10, United States Code, to 
                        an individual as a member of the uniformed 
                        services of the United States.
                    ``(C) Group health plan.--The term `group health 
                plan' has the meaning given such term in section 
                2791(a)(1) of the Public Health Service Act.
    ``(b) Eligibility of Individuals Age 62-to-65 Years of Age.--
            ``(1) In general.--Subject to paragraph (2), an individual 
        who meets the following requirements with respect to a month is 
        eligible to enroll under this part with respect to such month:
                    ``(A) Age.--As of the last day of the month, the 
                individual has attained 62 years of age, but has not 
                attained 65 years of age.
                    ``(B) Medicare eligibility (but for age).--The 
                individual would be eligible for benefits under part A 
                or part B for the month if the individual were 65 years 
                of age.
                    ``(C) Not eligible for coverage under group health 
                plans or federal health insurance programs.--The 
                individual is not, as of the last day of the month 
                involved, eligible for benefits or coverage under--
                            ``(i) a group health plan (other than such 
                        eligibility merely through a Federal or State 
                        COBRA continuation provision);
                            ``(ii) a health plan of the employee's 
                        spouse;
                            ``(iii) title XVIII, XIX, or XXI;
                            ``(iv) chapter 17 of title 38, United 
                        States Code;
                            ``(v) chapter 55 of title 10, United States 
                        Code;
                            ``(vi) chapter 89 of title 5, United States 
                        Code; or
                            ``(vii) any other provision of law.
            ``(2) Limitation on eligibility if terminated enrollment.--
        If an individual described in paragraph (1) enrolls under this 
        part and coverage of the individual is terminated under section 
        1859A(d) (other than because of age), the individual is not 
        again eligible to enroll under this subsection unless the 
        following requirements are met:
                    ``(A) New coverage under group health plan or 
                federal health insurance program.--After the date of 
                termination of coverage under such section, the 
                individual obtains coverage under a group health plan 
                or under a Federal health insurance program.
                    ``(B) Subsequent loss of new coverage.--The 
                individual subsequently loses eligibility for the 
                coverage described in subparagraph (A) and exhausts any 
                eligibility the individual may subsequently have for 
                coverage under a Federal or State COBRA continuation 
                provision.
            ``(3) Change in health plan eligibility does not affect 
        coverage.--In the case of an individual who is eligible for and 
        enrolls under this part under this subsection, the individual's 
        continued entitlement to benefits under this part shall not be 
        affected by the individual's subsequent eligibility for 
        benefits or coverage described in paragraph (1)(C), or 
        entitlement to such benefits or coverage.

``SEC. 1859A. ENROLLMENT PROCESS; COVERAGE.

    ``(a) In General.--An individual may enroll in the program 
established under this part only in such manner and form as may be 
prescribed by regulations, and only during an enrollment period 
prescribed by the Secretary consistent with the provisions of this 
section. Such regulations shall provide a process under which--
            ``(1) individuals eligible to enroll as of a month are 
        permitted to pre-enroll during a prior month within an 
        enrollment period described in subsection (b); and
            ``(2) each individual seeking to enroll under section 
        1859(b) is notified, before enrolling, of the deferred monthly 
        premium amount the individual will be liable for under section 
        1859C(b) upon attaining 65 years of age as determined under 
        section 1859B(c)(3).
    ``(b) Enrollment Periods.--
            ``(1) Individuals 62-to-65 years of age.--In the case of 
        individuals eligible to enroll under this part under section 
        1859(b)--
                    ``(A) Initial enrollment period.--If the individual 
                is eligible to enroll under such section for July 2003, 
                the enrollment period shall begin on May 1, 2003, and 
                shall end on August 31, 2003. Any such enrollment 
                before July 1, 2003, is conditioned upon compliance 
                with the conditions of eligibility for July 2003.
                    ``(B) Subsequent periods.--If the individual is 
                eligible to enroll under such section for a month after 
                July 2003, the enrollment period shall begin on the 
                first day of the second month before the month in which 
                the individual first is eligible to so enroll and shall 
                end four months later. Any such enrollment before the 
                first day of the third month of such enrollment period 
                is conditioned upon compliance with the conditions of 
                eligibility for such third month.
            ``(2) Authority to correct for government errors.--The 
        provisions of section 1837(h) apply with respect to enrollment 
        under this part in the same manner as they apply to enrollment 
        under part B.
    ``(c) Date Coverage Begins.--
            ``(1) In general.--The period during which an individual is 
        entitled to benefits under this part shall begin as follows, 
        but in no case earlier than July 1, 2003:
                    ``(A) In the case of an individual who enrolls 
                (including pre-enrolls) before the month in which the 
                individual satisfies eligibility for enrollment under 
                section 1859, the first day of such month of 
                eligibility.
                    ``(B) In the case of an individual who enrolls 
                during or after the month in which the individual first 
                satisfies eligibility for enrollment under such 
                section, the first day of the following month.
            ``(2) Authority to provide for partial months of 
        coverage.--Under regulations, the Secretary may, in the 
        Secretary's discretion, provide for coverage periods that 
        include portions of a month in order to avoid lapses of 
        coverage.
            ``(3) Limitation on payments.--No payments may be made 
        under this title with respect to the expenses of an individual 
        enrolled under this part unless such expenses were incurred by 
        such individual during a period which, with respect to the 
        individual, is a coverage period under this section.
    ``(d) Termination of Coverage.--
            ``(1) In general.--An individual's coverage period under 
        this part shall continue until the individual's enrollment has 
        been terminated at the earliest of the following:
                    ``(A) General provisions.--
                            ``(i) Notice.--The individual files notice 
                        (in a form and manner prescribed by the 
                        Secretary) that the individual no longer wishes 
                        to participate in the insurance program under 
                        this part.
                            ``(ii) Nonpayment of premiums.--The 
                        individual fails to make payment of premiums 
                        required for enrollment under this part.
                            ``(iii) Medicare eligibility.--The 
                        individual becomes entitled to benefits under 
                        part A or enrolled under part B (other than by 
                        reason of this part).
                    ``(B) Termination based on age.--The individual 
                attains 65 years of age.
            ``(2) Effective date of termination.--
                    ``(A) Notice.--The termination of a coverage period 
                under paragraph (1)(A)(i) shall take effect at the 
                close of the month following for which the notice is 
                filed.
                    ``(B) Nonpayment of premium.--The termination of a 
                coverage period under paragraph (1)(A)(ii) shall take 
                effect on a date determined under regulations, which 
                may be determined so as to provide a grace period in 
                which overdue premiums may be paid and coverage 
                continued. The grace period determined under the 
                preceding sentence shall not exceed 60 days; except 
                that it may be extended for an additional 30 days in 
                any case where the Secretary determines that there was 
                good cause for failure to pay the overdue premiums 
                within such 60-day period.
                    ``(C) Age or medicare eligibility.--The termination 
                of a coverage period under paragraph (1)(A)(iii) or 
                (1)(B) shall take effect as of the first day of the 
                month in which the individual attains 65 years of age 
                or becomes entitled to benefits under part A or 
                enrolled for benefits under part B (other than by 
                reason of this part).

``SEC. 1859B. PREMIUMS.

    ``(a) Amount of Monthly Premiums.--
            ``(1) Base monthly premiums.--The Secretary shall, during 
        September of each year (beginning with 2002), determine the 
        following premium rates which shall apply with respect to 
        coverage provided under this title for any month in the 
        succeeding year:
                    ``(A) Base monthly premium for individuals 62 years 
                of age or older.--A base monthly premium for 
                individuals 62 years of age or older, equal to \1/12\ 
                of the base annual premium rate computed under 
                subsection (b).
            ``(2) Deferred monthly premiums for individuals 62 years of 
        age or older.--The Secretary shall, during September of each 
        year (beginning with 2002), determine under subsection (c) the 
        amount of deferred monthly premiums that shall apply with 
        respect to individuals who first obtain coverage under this 
        part under section 1859(b) in the succeeding year.
    ``(b) Base Annual Premium for Individuals 62 Years of Age or 
Older.--
            ``(1) In general.--The base annual premium under this 
        subsection for months in a year for individuals 62 years of age 
        or older residing is equal to the average, annual per capita 
amount estimated for the year by the Secretary in accordance with 
paragraph (2).
            ``(2) National, per capita average.--The Secretary shall 
        estimate the average, annual per capita amount that would be 
        payable under this title with respect to individuals residing 
        in the United States who meet the requirements of section 
        1859(b)(1) as if all such individuals were eligible for (and 
        enrolled) under this title during the entire year (and assuming 
        that section 1862(b)(2)(A)(i) did not apply).
    ``(c) Deferred Premium Rate for Individuals 62 Years of Age or 
Older.--The deferred premium rate for individuals within a cohort of 
enrollees who obtain coverage under section 1859(b) in a year shall be 
computed by the Secretary as follows:
            ``(1) Estimation of national, per capita annual average 
        expenditures for enrollment cohort.--The Secretary shall 
        estimate the average, per capita annual amount that will be 
        paid under this part for individuals in such cohort during the 
        period of enrollment under section 1859(b). In making such 
        estimate for coverage beginning in a year before 2004, the 
        Secretary may base such estimate on the average, per capita 
        amount that would be payable if the program had been in 
        operation over a previous period of at least 4 years.
            ``(2) Difference between estimated expenditures and 
        estimated premiums.--Based on the characteristics of 
        individuals in such cohort, the Secretary shall estimate during 
        the period of coverage of the cohort under this part under 
        section 1859(b) the amount by which--
                    ``(A) the amount estimated under paragraph (1); 
                exceeds
                    ``(B) the average, annual per capita amount of 
                premiums that will be payable for months during the 
                year under section 1859C(a) for individuals in such 
                cohort (including premiums that would be payable if 
                there were no terminations in enrollment under clause 
                (i) or (ii) of section 1859A(d)(1)(A)).
            ``(3) Actuarial computation of deferred monthly premium 
        rates.--The Secretary shall determine deferred monthly premium 
        rates for individuals in such cohort in a manner so that the 
        estimated actuarial value of such premiums payable under 
        section 1859C(b) is equal to the estimated actuarial present 
        value of the differences described in paragraph (2). Such rate 
        shall be computed for each individual in the cohort in a manner 
        so that the rate is based on the number of months between the 
        first month of coverage based on enrollment under section 
        1859(b) and the month in which the individual attains 65 years 
        of age.
            ``(4) Determinants of actuarial present values.--The 
        actuarial present values described in paragraph (3) shall 
        reflect--
                    ``(A) the estimated probabilities of survival at 
                ages 62 through 84 for individuals enrolled during the 
                year; and
                    ``(B) the estimated effective average interest 
                rates that would be earned on investments held in the 
                trust funds under this title during the period in 
                question.

``SEC. 1859C. PAYMENT OF PREMIUMS.

    ``(a) Payment of Base Monthly Premium.--
            ``(1) In general.--The Secretary shall provide for payment 
        and collection of the base monthly premium, determined under 
        section 1859B(a)(1) for the age (and age cohort, if applicable) 
        of the individual involved, in the same manner as for payment 
        of monthly premiums under section 1840, except that, for 
        purposes of applying this section, any reference in such 
        section to the Federal Supplementary Medical Insurance Trust 
        Fund is deemed a reference to the Trust Fund established under 
        section 1859D.
            ``(2) Period of payment.--In the case of an individual who 
        participates in the program established by this title, the base 
        monthly premium shall be payable for the period commencing with 
        the first month of the individual's coverage period and ending 
        with the month in which the individual's coverage under this 
        title terminates.
    ``(b) Payment of Deferred Premium for Individuals Covered After 
Attaining Age 62.--
            ``(1) Rate of payment.--
                    ``(A) In general.--In the case of an individual who 
                is covered under this part for a month pursuant to an 
                enrollment under section 1859(b), subject to 
                subparagraph (B), the individual is liable for payment 
                of a deferred premium in each month during the period 
                described in paragraph (2) in an amount equal to the 
                full deferred monthly premium rate determined for the 
                individual under section 1859B(c).
                    ``(B) Special rules for those who disenroll 
                early.--
                            ``(i) In general.--If such an individual's 
                        enrollment under such section is terminated 
                        under clause (i) or (ii) of section 
                        1859A(d)(1)(A), subject to clause (ii), the 
                        amount of the deferred premium otherwise 
                        established under this paragraph shall be pro-
                        rated to reflect the number of months of 
                        coverage under this part under such enrollment 
                        compared to the maximum number of months of 
                        coverage that the individual would have had if 
                        the enrollment were not so terminated.
                            ``(ii) Rounding to 12-month minimum 
                        coverage periods.--In applying clause (i), the 
                        number of months of coverage (if not a multiple 
                        of 12) shall be rounded to the next highest 
                        multiple of 12 months, except that in no case 
                        shall this clause result in a number of months 
                        of coverage exceeding the maximum number of 
                        months of coverage that the individual would 
                        have had if the enrollment were not so 
                        terminated.
            ``(2) Period of payment.--The period described in this 
        paragraph for an individual is the period beginning with the 
        first month in which the individual has attained 65 years of 
        age and ending with the month before the month in which the 
        individual attains 85 years of age.
            ``(3) Collection.--In the case of an individual who is 
        liable for a premium under this subsection, the amount of the 
        premium shall be collected in the same manner as the premium 
        for enrollment under such part is collected under section 1840, 
        except that any reference in such section to the Federal 
        Supplementary Medical Insurance Trust Fund is deemed to be a 
        reference to the Medicare Early Access Trust Fund established 
        under section 1859D.
    ``(c) Application of Certain Provisions.--The provisions of section 
1840 (other than subsection (h)) shall apply to premiums collected 
under this section in the same manner as they apply to premiums 
collected under part B, except that any reference in such section to 
the Federal Supplementary Medical Insurance Trust Fund is deemed a 
reference to the Trust Fund established under section 1859D.

``SEC. 1859D. MEDICARE EARLY ACCESS TRUST FUND.

    ``(a) Establishment of Trust Fund.--
            ``(1) In general.--There is hereby created on the books of 
        the Treasury of the United States a trust fund to be known as 
        the `Medicare Early Access Trust Fund' (in this section 
        referred to as the `Trust Fund'). The Trust Fund shall consist 
        of such gifts and bequests as may be made as provided in 
        section 201(i)(1) and such amounts as may be deposited in, or 
        appropriated to, such fund as provided in this title.
            ``(2) Premiums.--Premiums collected under section 1859B 
        shall be transferred to the Trust Fund.
    ``(b) Incorporation of Provisions.--
            ``(1) In general.--Subject to paragraph (2), subsections 
        (b) through (i) of section 1841 shall apply with respect to the 
        Trust Fund and this title in the same manner as they apply with 
        respect to the Federal Supplementary Medical Insurance Trust 
        Fund and part B, respectively.
            ``(2) Miscellaneous references.--In applying provisions of 
        section 1841 under paragraph (1)--
                    ``(A) any reference in such section to `this part' 
                is construed to refer to this part D;
                    ``(B) any reference in section 1841(h) to section 
                1840(d) and in section 1841(i) to sections 1840(b)(1) 
                and 1842(g) are deemed references to comparable 
                authority exercised under this part; and
                    ``(C) payments may be made under section 1841(g) to 
                the Trust Funds under sections 1817 and 1841 as 
                reimbursement to such funds for payments they made for 
                benefits provided under this part.

``SEC. 1859E. OVERSIGHT AND ACCOUNTABILITY.

    ``(a) Through Annual Reports of Trustees.--The Board of Trustees of 
the Medicare Early Access Trust Fund under section 1859D(b)(1) shall 
report on an annual basis to Congress concerning the status of the 
Trust Fund and the need for adjustments in the program under this part 
to maintain financial solvency of the program under this part.
    ``(b) Periodic GAO Reports.--The Comptroller General of the United 
States shall periodically submit to Congress reports on the adequacy of 
the financing of coverage provided under this part. The Comptroller 
General shall include in such report such recommendations for 
adjustments in such financing and coverage as the Comptroller General 
deems appropriate in order to maintain financial solvency of the 
program under this part.

``SEC. 1859F. ADMINISTRATION AND MISCELLANEOUS.

    ``(a) Treatment for Purposes of Title.--Except as otherwise 
provided in this part--
            ``(1) individuals enrolled under this part shall be treated 
        for purposes of this title as though the individual were 
        entitled to benefits under part A and enrolled under part B; 
        and
            ``(2) benefits described in section 1859 shall be payable 
        under this title to such individuals in the same manner as if 
        such individuals were so entitled and enrolled.
    ``(b) Not Treated As Medicare Program for Purposes of Medicaid 
Program.--For purposes of applying title XIX (including the provision 
of medicare cost-sharing assistance under such title), an individual 
who is enrolled under this part shall not be treated as being entitled 
to benefits under this title.
    ``(c) Not Treated As Medicare Program for Purposes of COBRA 
Continuation Provisions.--In applying a COBRA continuation provision 
(as defined in section 2791(d)(4) of the Public Health Service Act), 
any reference to an entitlement to benefits under this title shall not 
be construed to include entitlement to benefits under this title 
pursuant to the operation of this part.''.
    (b) Conforming Amendments to Social Security Act Provisions.--
            (1) Section 201(i)(1) of the Social Security Act (42 U.S.C. 
        401(i)(1)) is amended by striking ``or the Federal 
        Supplementary Medical Insurance Trust Fund'' and inserting 
        ``the Federal Supplementary Medical Insurance Trust Fund, and 
        the Medicare Early Access Trust Fund''.
            (2) Section 201(g)(1)(A) of such Act (42 U.S.C. 
        401(g)(1)(A)) is amended by striking ``and the Federal 
        Supplementary Medical Insurance Trust Fund established by title 
        XVIII'' and inserting ``, the Federal Supplementary Medical 
        Insurance Trust Fund, and the Medicare Early Access Trust Fund 
        established by title XVIII''.
            (3) Section 1820(i) of such Act (42 U.S.C. 1395i-4(i)) is 
        amended by striking ``part D'' and inserting ``part E''.
            (4) Part C of title XVIII of such Act is amended--
                    (A) in section 1851(a)(2)(B) (42 U.S.C. 1395w-
                21(a)(2)(B)), by striking ``1859(b)(3)'' and inserting 
                ``1858(b)(3)'';
                    (B) in section 1851(a)(2)(C) (42 U.S.C. 1395w-
                21(a)(2)(C)), by striking ``1859(b)(2)'' and inserting 
                ``1858(b)(2)'';
                    (C) in section 1852(a)(1) (42 U.S.C. 1395w-
                22(a)(1)), by striking ``1859(b)(3)'' and inserting 
                ``1858(b)(3)'';
                    (D) in section 1852(a)(3)(B)(ii) (42 U.S.C. 1395w-
                22(a)(3)(B)(ii)), by striking ``1859(b)(2)(B)'' and 
                inserting ``1858(b)(2)(B)'';
                    (E) in section 1853(a)(1)(A) (42 U.S.C. 1395w-
                23(a)(1)(A)), by striking ``1859(e)(4)'' and inserting 
                ``1858(e)(4)''; and
                    (F) in section 1853(a)(3)(D) (42 U.S.C. 1395w-
                23(a)(3)(D)), by striking ``1859(e)(4)'' and inserting 
                ``1858(e)(4)''.
            (5) Section 1853(c) of such Act (42 U.S.C. 1395w-23(c)) is 
        amended--
                    (A) in paragraph (1), by striking ``or (7)'' and 
                inserting ``, (7), or (8)'', and
                    (B) by adding at the end the following:
            ``(8) Adjustment for early access.--In applying this 
        subsection with respect to individuals entitled to benefits 
        under part D, the Secretary shall provide for an appropriate 
        adjustment in the Medicare+Choice capitation rate as may be 
        appropriate to reflect differences between the population 
        served under such part and the population under parts A and 
        B.''.
    (c) Other Conforming Amendments.--
            (1) Section 138(b)(4) of the Internal Revenue Code of 1986 
        is amended by striking ``1859(b)(3)'' and inserting 
        ``1858(b)(3)''.
            (2)(A) Section 602(2)(D)(ii) of the Employee Retirement 
        Income Security Act of 1974 (29 U.S.C. 1162(2)) is amended by 
        inserting ``(not including an individual who is so entitled 
        pursuant to enrollment under section 1859A)'' after ``Social 
        Security Act''.
            (B) Section 2202(2)(D)(ii) of the Public Health Service Act 
        (42 U.S.C. 300bb-2(2)(D)(ii)) is amended by inserting ``(not 
        including an individual who is so entitled pursuant to 
        enrollment under section 1859A)'' after ``Social Security 
        Act''.
            (C) Section 4980B(f)(2)(B)(i)(V) of the Internal Revenue 
        Code of 1986 is amended by inserting ``(not including an 
        individual who is so entitled pursuant to enrollment under 
        section 1859A)'' after ``Social Security Act''.
                                 <all>